My Journey From A Speculator To AN Investor!

My Journey From A Speculator To An Investor!

We all love stories. They allow us to dream. Go to places and do things that we won’t do in our real lives. May be some action along the way. And its a fun activity.No need to move. Just dream!. So, I thought of telling a story myself. May be you like it or may be you don’t. Or you find something interesting in it. After all, it is a great story (a greatly exaggerated one!). So, below I present “My Journey From A Speculator To An Investor!”

The story starts with a feeling. Love!. The story is divided into two phases of my life . Like a love story, this story also has a tragic part and a happily ever after (we will see that. ha ha ha!). I fell in love. With Stock Market. And the story continues.

I Am In Love:

A few months had passed by in  2014 and all I heard was the daily rise in stock prices in India. Sensex and Nifty and GDP. The new government had just been elected with absolute majority and market was booming. A clear mandate meant no interference from different parties and government could go for big ticket reforms. And stock market was proving to be a clear metric showing bigger numbers every other day.

It looked like anybody could make money in the market. And it was really true at that time. Every day advisers would give tips on buying and selling and list of profitable stocks to choose from. People from every sphere of work would pour in their hard earned money in the stock market. It was a dream run. No one wanted to miss on the opportunity. Every one wanted to be rich.I was getting interested. How could I miss the opportunity!

In November of 2014, I approached a broker to open a demat account and a trading account. And then based on the advice of some financial advisers,  I started purchasing some stocks from January 2015. Initially, I also made some money. A small amount. But , percentage wise  it was good.  Then started the beginning of my first mistake in the stock market.

My First Mistake:

I started buying stocks as per my liking. I started pouring more money every week into the stock market. It was like a gamble. Like an addiction. I thought, I was right. I was sure of making money in the market. My initial success made me over confident about my stock picks. The Invincible!

I was bound to be wrong. I started purchasing stocks out of gut feeling , sometimes on how they spelled. If I liked it’s name, I would purchase it. Bound to fail. Just didn’t see coming at that point of time.

And then I read it somewhere: “Invest in sectors that you understand ” . And I said, OKEY !  I understand stock market. And with it, I made another mistake.

My Second Mistake:

Confident of my understanding about the stock market, I took a loan and invested in the market. I was happy. It was a sure shot win.I would make many times more than the interest I will have to pay. No need to worry. My banker was happy. He had one more customer.

My Third Mistake:

I started analyzing the graphs. Purchased stocks which had shed their value over time.I was analyzing. According to me, they were undervalued stocks. Never analysed why they were loosing value? Could it be because of bad management of the company. Or that had resulted in a debt position for the company. Never realized or analysed. What about the cash flow of the company? I needn’t think about it. I was right! Cash flow is the amount of money ,the company is bringing in and also the amount it is sending out of its account. Got it?

My Fourth Mistake:

I started to trade in the market. Daily trading mostly. And as I already wrote, with borrowed money. Big mistake. I just didn’t realize it then.It was a smart move. As far as I thought then.

Fifth Mistake during My Journey From A Speculator To An Investor!:

After some weeks, slowly, most of the stocks, I had invested into, were down.Below my initial investment level. It went on for a very long time. I started to loose patience. It started to look very confusing. The stocks would sometimes rise and looked like every loss would be recovered. But, then the next day it would go down again.After a long time, I sold off all my investment and promised never to invest again.Then I approached the broker and closed my demat account.

One thing to keep in mind while investing is that the market is volatile and unpredictable in the short span of time. Basically up to three years, as I could observe. Don’t invest unless you can keep patience. Otherwise you will loose money. Also, Don’t invest if you need it for any urgent work. Better keep it in fixed deposit in bank.

FYI, all the stocks that I sold at that time are mostly around double the price now, than at which I purchased. Mistake happens!

 End Of Phase One of “My Journey From A Speculator To An Investor!”:

So, I fell in love with stock market for all wrong reasons. Get rich quick scheme. Started purchasing stocks on my gut feeling and then based on names which I liked. Then took a loan . And Then Lost all the money in the market. Even my initial gains. Closed my demat account and booked loss. Promised to keep away from stock market.

Like every love story, there has to be a happily ever after.Otherwise the story is not complete. So , here it comes:

Desperation:

How could I live without my love. The insect of stock market investing started tickling again. I started to back track. But it didn’t start right away. First I started reading the financial news. It went on for some time. Then I started watching for the stock prices. And one fine day, I approached a broker and opened a demat and a trading account, just for some limited activity. And then somehow, it turned out to be a major activity again.

First Step:

There is not any interesting step here. I opened an account for trading and demat again. Nothing big here. Although, initially I never thought of engaging actively with the stock market, I liked being back. As if there was something missing in my life and the market completes it.(Filmy!)

Second Step:

Picked up a book named “the intelligent investor.” Studied religiously for a long time and got bored and kept it aside. Then, after a few months,  I got a present from my brother. It contained a book named ” Stocks To Riches“. I was a simply a great book , with easy to understand concepts. Everyone should read it.  I completed that and then purchased ” The little book that still beats the market.” It was entertaining and fun to read. Also, informative. And then I started reading ” The Intelligent Investor” and it made sense.

Third Step:

This is not a step. I read books. Keep reading and increase your knowledge. I included it to show that more books were read on the way. That’s it.Read a lot of books though!

Fourth Step:

I stopped trading in the stock market. I started to buy what I knew about. But slowly. I was not racing against time.Also, I stopped the urge to buy. I started to learn analysis. No more gut favoring purchases. I started to read about undervalued stocks and their meaning. Not every stock  that goes down ,is undervalued. May be there is some problem or inefficiency.

Fifth Step:

I started to question.why is this stock going down? Is it undervalued?What profit is being generated and what are the sources of profit? Is there is some management inefficiency? Is the board committed to its company? What are they doing with the income and profit? Are they reinvesting it in business or distributing it between them? Is the money being earned or wasted? What about the cash flow? And there are several other questions being inquired about.

Sixth Step:

I invest what I have. I stopped borrowing money.There is always a greed that encourages me to take a small loan and invest it. But, I resist the idea. It is better to have your own money in the game. That way, it is easier to hold on in case of any volatility.

And I Lived Happily Ever After:

Since I stopped trading and speculating in the stock market, it has been a comfortable journey. My decision to not borrow has been a great contributor to it. I feel more in control. With the increase in technology and volatility in the market now a days, it is easy to hold on if the funds are not borrowed. The selling pressure is less in comparison. Reading has made it easier to understand different functionalities in the market.But, I have a question to ask. Don’t you think if instead of writing ” My Journey From A Speculator To AN Investor!” , I should have written ” My Journey From financial illiterate To An Investor!”. Books do a great job.  This in turn has helped me understand the market better. Thank you for taking your time out to read this article. It means a lot to me.  And I hope this article adds value to your life.

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